ITAT Remands Capital Gains Tax Dispute to AO to Verify Agricultural Land Status:

The assessee is an individual and non-resident for the relevant assessment year who filed her return of income declaring total income of Rs. 2,99,202. During the relevant previous year, she sold an immovable property for Rs. 5,17,15,000, which had devolved upon her through inheritance from her predecessors.

The assessee argued that the property was originally agricultural land inherited from her ancestors and was subsequently converted into non-agricultural land. She also claimed the cost of acquisition with reference to the property’s value as on 1 April 2001, in accordance with the applicable provisions governing inherited property. The AO treated the cost of acquisition as nil and brought the entire sale consideration of Rs. 5,17,15,000 to tax as long-term capital gains. The DRP substantially upheld the AO’s action.

The Tribunal observed that the additional grounds went to the root of the controversy and concerned the taxability of the very transaction already under appeal. The Tribunal noted that the additional documents were intended to prove that agricultural operations were actually carried out on the land during the relevant period, including around the time of its sale in 2022. Since the AO had not examined this evidence, the Tribunal considered factual verification necessary before the issue could be conclusively decided.

Accordingly, the Tribunal admitted the additional evidence and restored the matter to the AO for fresh examination in the interest of substantial justice.